QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: March
31, 2015

[ ]

TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE EXCHANGE ACT

For the transition period from ________________to
________________

COMMISSION FILE NUMBER 000-52488

INFRAX SYSTEMS, INC.

(Exact name of Registrant as specified in charter)

NEVADA

20-2583185

(State or other jurisdiction of incorporation or organization)

(IRS Employer Identification Number)

3637 4th Street North, St.
Petersburg, FL 33704

(Address of principal executive offices) (ZIP
Code)

(727) 498-8514

(Registrant's telephone no., including area
code)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

o Yes

xNo

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x Yes

o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

xYes

oNo

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

o Yes

xNo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.

o Large accelerated filer

o Accelerated filer

o Non-accelerated filer

x Smaller reporting Company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

o Yes

xNo

As of May 19, 2015, the registrant had 898,175,554
shares of common stock outstanding.

TABLE OF CONTENTS

PART I

FINANCIAL INFORMATION

PAGE

Item 1

Condensed Consolidated Financial Statements

Condensed Consolidated Balance Sheets as of March 31, 2015 (unaudited) and June 30, 2014 (audited)

3

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended March 31, 2015 and 2014 (unaudited)

The accompanying notes are an integral part of these financial statements.

Infrax Systems, Inc.

Consolidated Statements of Operations

For the Three Months Ended

For the Nine Months Ended

March 31,

March 31,

2015

2014

2015

2014

Revenues

$

12,863

$

27,550

$

43,046

$

118,747

Direct costs

—

764

—

21,384

Gross Profit

12,863

26,786

43,046

97,363

Operating expenses:

Salaries and benefits

146,733

109,190

359,997

333,013

Stock based compensation

65,000

—

65,000

75,000

Consulting

—

—

—

—

Professional fees

670

17,106

58,260

51,074

General and administrative

26,606

28,084

76,431

68,075

Amortization and depreciation

382,681

415,541

1,148,099

1,246,459

Total operating expenses

621,690

569,921

1,707,788

1,773,621

Other income (expense):

Loss on Purchase of HempTech

(5,042,225

)

—

(5,042,225

)

—

Gain from Settlement of Debt

—

871,446

—

Interest expenses

(156,622

)

(11,469

)

(216,539

)

(33,384

)

Total other (expense)

(5,198,847

)

(11,469

)

(4,387,318

)

(33,384

)

Loss from operations before income taxes and minority interest

(5,807,674

)

(554,604

)

(6,052,060

)

(1,709,642

)

Provision for income taxes

—

—

—

—

Loss from operations before minority interest

(5,807,674

)

(554,604

)

(6,052,060

)

(1,155,038

)

Minority Interest

31,448

41,580

97,260

121,190

Net loss

$

(5,776,226

)

$

(513,024

)

$

(5,954,800

)

$

(1,588,452

)

Earnings (loss) per share:

Basic

$

(0.03

)

$

(0.005

)

$

(0.05

)

$

(0.015

)

Weighted average shares outstanding

Basic

173,152,153

108,212,682

131,472,528

106,661,587

Consolidated Statements of Cash Flows

(unaudited)

For the Nine Months Ended

March 31,

2015

2014

Cash Flows from Operating Activities:

Net (loss) income

$

(5,954,800

)

$

(1,588,452

)

Adjustment to reconcile Net Income to net

cash provided by or (used in) operations:

Depreciation and amortization

1,148,099

1,246,460

Amortization of deferred revenue

(10,073

)

(30,233

)

Amortization of debt discount

84,829

—

Loss on purchase of Hemptech

5,042,225

Gain on settlement of debt

(871,946

)

Stock based compensation

65,000

75,000

Minority interest

(97,260

)

(121,190

)

Changes in assets and liabilities:

Accounts receivable

(209,500

)

19,256

Prepaid and other

11,856

(10,666

)

Accounts payable

33,155

53,758

Accrued expenses

547,961

336,221

Customer deposits and deferred revenue

190,000

—

Net Cash (Used) by Operating Activities

(20,454

)

10,375

Cash Flows from Investing Activities:

(Purchase) disposal of property and equipment

(2,172

)

—

Net Cash (Used) Provided by Investing Activities

(2,172

)

—

Cash Flows from Financing Activities:

Net proceeds from debt

101,500

Increase (decrease) in related party balances

(77,314

)

19,919

Net Cash (Used) Provided by Financing Activities

24,186

19,919

Net increase/decrease in Cash

1,560

73

Cash at beginning of period

547

300

Cash at end of period

$

2,107

$

373

Supplemental cash flow information:

Interest paid

$

—

$

—

Taxes paid

$

—

$

—

Supplemental schedule of non-cash financing and investing activities:

None

The accompanying notes are an integral part of these financial statements.

Infrax Systems, Inc.

Notes to Condensed Consolidated Financial
Statements

As of March 31, 2015

(Unaudited)

1. History of the Company and Nature of the Business

History of the Company

Nature of Business

Since its inception, the Company had been dedicated
to selling and/or licensing a fiber optic management software system under the name OptiCon Network Manager, originally developed,
and acquired from Corning Cable System, Inc. through a related company, FutureTech Capital, LLC. In October 2009, the Company
began developing smart grid energy related products. As of June 29, 2010, the Company acquired the assets and management of Trimax
Wireless Systems, Inc. (“Trimax”), in exchange for equity and a note payable. In April 2011, the Company acquired controlling
interest in Lockwood Technology Corporation (“Lockwood”), a provider of advanced asset management solutions. The Trimax
and Lockwood product lines are expected to provide an operating platform and enhanced operating effectiveness to the Secure Intelligent
Energy Platform. In February 2015, the Company acquired 100% of the stock of Hemptech Corp., a provider of smart sensors and data
analysis technology, RFID tracking systems, communication networks, and surveillance security for the agriculture industry.

While we continue
to support the OptiCon Network Management platform, the Company has shifted its focus and energies towards the “Smart Grid”
energy sector. The Company believes our secure integrated platform will hasten the deployment of all Smart Grid technology for
resource constrained small and mid-sized utilities. Infrax’s advantage comes from our products ability to enable
the creation of a secure platform scalable to deliver a broad set of intelligent Smart Grid initiatives across millions of endpoints
for Utilities.

2. Summary of Significant Accounting Policies

Basis of Presentation

The consolidated balance sheet as of March
31, 2015, the consolidated statements of operations and statements of cash flows for the nine months then ended, have been prepared
by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures, normally included in the financial statements prepared in accordance with accounting principles generally
accepted in the United States of America, have been condensed or omitted as allowed by such rules and regulations, and the Company
believes that the disclosures are adequate to make the information presented not misleading.

In the opinion of management, all adjustments
necessary to present fairly the financial position at March 31, 2015, and the results of operations and changes in cash flows for
the nine months then ended, have been made. These financial statements should be read in conjunction with our audited financial
statements and notes thereto included in our annual report for the year ended June 30, 2014 on Form 10-K filed with the SEC on
September 29, 2014.

Certain reclassifications have been made to
the Statement of Operations for disclosure purposes and comparability.

Use of Estimates

The Company prepares its financial statements
in conformity with generally accepted accounting principles in the United States of America. These principals require management
to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
period. Management believes that these estimates are reasonable and have been discussed with the Board of Directors; however, actual
results could differ from those estimates.

Principles of Consolidation

The consolidated financial statements include
the accounts and operations of Infrax Systems, Inc., and its wholly owned subsidiary, Infrax Systems SA (Pty) Ltd, an inactive
foreign subsidiary, Lockwood Technology Corporation (70% owned by Infrax Systems, Inc.), and Hemptech Corp, a newly acquired subsidiary
as of February 27, 2015, (collectively referred to as the “Company”). Accordingly, the assets and liabilities,
and expenses of this company have been included in the accompanying consolidated financial statements, and material intercompany
transactions have been eliminated.

The Trimax Wireless, Inc. acquisition was effective
June 29, 2010. The Company, per the agreement, acquired all the assets and liabilities of Trimax Wireless, Inc. As an asset purchase
the acquired assets and liabilities are included in the accounts of Infrax Systems, Inc.

The Hemptech Corp acquisition was effective February 27, 2015. The
Company, per the agreement, acquired all of the stock of Hemptech.

A majority of the outstanding stock is owned by FutureWorld Corporation.
These financial statements will be consolidated along with other subsidiaries of Futureworld.

Variable Interest Entities

The Company considers the consolidation of
entities to which the usual condition (ownership of a majority voting interest) of consolidation does not apply, focusing on controlling
financial interests that may be achieved through arrangements that do not involve voting interest. If an enterprise
holds a majority of the variable interests of an entity, it would be considered the primary beneficiary. The primary beneficiary
is generally required to consolidate assets, liabilities and non-controlling interests at fair value (or at historical cost if
the entity is a related party) and subsequently account for the variable interest as if it were consolidated based on a majority
voting interest. The Company has evaluated all related parties, contracts, agreements and arrangements in which it may
hold a variable interest. The Company has determined it is not the primary beneficiary in any of these entities, arrangements or
participates in any of the activities.

Financial Instruments

The Company’s balance sheets include
the following financial instruments: cash, accounts receivable, inventory, accounts payable, accrued expenses, deferred revenue,
and notes payable and notes payable to stockholder. The carrying amounts of current assets and current liabilities approximate
their fair value because of the relatively short period of time between the origination of these instruments and their expected
realization. The carrying values of the note payable to stockholder approximates fair value based on borrowing rates
currently available to the Company for instruments with similar terms and remaining maturities.

In September 2006, the Financial Accounting
Standards Board (FASB) introduced a framework for measuring fair value and expanded required disclosure about fair value measurements
of assets and liabilities. The Company adopted the standard for those financial assets and liabilities as of the beginning of the
2008 fiscal year and the impact of adoption was not significant. FASB Accounting Standards Codification (ASC) 820 “Fair
Value Measurements and Disclosures” (ASC 820) defines fair value as the exchange price that would be received for an
asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in
an orderly transaction between market participants on the measurement date.. ASC 820 also establishes a fair value hierarchy that
distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources
(observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the
best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels,
which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and
the lowest priority to unobservable inputs (Level 3). The Three levels of the fair value hierarchy are described below:

·Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement
date for identical, unrestricted assets or liabilities

·Level
2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or
indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar
assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability
(e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or
other means.

·Level
3 - Inputs that are both significant to the fair value measurement and unobservable.

Fair value estimates discussed herein are based
upon certain market assumptions and pertinent information available to management as of March 31, 2015. The respective carrying
value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments.
These financial instruments include accounts receivable, other current assets, accounts payable, accrued compensation and accrued
expenses. The fair value of the Company’s notes payable is estimated based on current rates that would be available for debt
of similar terms which is not significantly different from its stated value.

The Company applied ASC 820 for all non-financial
assets and liabilities measured at fair value on a non-recurring basis. The adoption of ASC 820 for non-financial assets and liabilities
did not have a significant impact on the Company’s financial statements.

As of March 31, 2015 and June 30, 2014, the
fair values of the Company’s financial instruments approximate their historical carrying amount.

Cash and Cash Equivalents

The majority of cash is maintained with major
financial institutions in the United States. Deposits with these banks may exceed the amount of insurance provided on
such deposits. Generally, these deposits may be redeemed on demand and, therefore, bear minimal risk. The
Company considers all highly liquid investments purchased with an original maturity of Three months or less to be cash equivalents.

Accounts Receivable and Credit

Accounts receivable consist of amounts due
for the delivery of sales to customers. Prepayments on account are recorded as customer deferred revenue. Additionally,
the Company invoices projects when signed agreement or statements of work are received. Amounts are recorded at the anticipated
collectible amount and recorded as deferred revenue until such time that the work is performed. Contract revenue is recognized
as the contract is completed, based on defined milestones (see policy on revenue recognition). An allowance for doubtful accounts
is considered to be established for any amounts that may not be recoverable, which is based on an analysis of the Company’s
customer credit worthiness, and current economic trends. Based on management’s review of accounts receivable,
no allowance for doubtful accounts was considered necessary. Receivables are determined to be past due, based
on payment terms of original invoices. The Company does not typically charge interest on past due receivables.

Inventories

Inventories are stated at the lower of cost
or market, which approximates actual cost. Cost is determined using the first-in, first-out method. Inventory is comprised
of component parts and accessories available for sale. Parts are generally purchased for projects, as minimal inventory is held
to supply customers.

Property & Equipment

Property and equipment are recorded at historical
cost or acquisition value. Depreciation is computed on the straight-line method over estimated useful lives of the respective assets,
ranging from five to nine years. The carrying amount of all long-lived assets is evaluated periodically to determine if adjustment
to the depreciation and amortization period or the unamortized balance is warranted. Based upon the Company's most recent analysis,
management believes that no impairment of property and equipment exists at March 31, 2015.

Intangible Property

On June 29, 2010 the Company acquired the assets
of Trimax Wireless Systems, Inc., including licenses and trademarks. The purchase price was allocated first to the identifiable
assets received, allocating the remaining costs to the intellectual property. The valuation considered future cash flows of the
operating intangible assets acquired. The valuation of the intellectual property was limited to the acquisition price (valuation
of stock consideration and note payable), less the fair market value of identifiable assets. The shares issued in exchange for
the acquired property were valued at the fair market value of the equivalent common stock as of the date of closing. The fair market
value of consideration issued (stock and note payable) to the sellers was an aggregate amount of $6,511,364. The value assigned
to the carrying value of the acquired intellectual property was $6,329,342. Intellectual property has an estimated useful life
of 59 months (remaining life of patents).

On May, 2011 the Company completed the acquisition
of controlling interest (70%) in Lockwood Technology Corporation, in exchange for stock and certain considerations (cash and warrants).
The shares were issued at the fair market value at the date of the transaction ($1,650,000) and warrants were valued using an option
price model ($477,900). The total purchase price, net of cash, notes receivable, and net assets acquired was $1,956,158. The Company
recognized an immediate impairment in the amount of $641,008 in consideration of its analysis of future discounted cash flows and
industry multiples of the acquired Company, resulting in a net intangible assets of $1,315,150. Management’s allocation of
the purchase price was based on our assessment of the fair market value of the assets acquired, in accordance with Accounting Standard
Codification, Topic 805. Fixed assets and other tangible assets were evaluated for market value. There were no identifiable assets
that had any significant appreciation or impairment; therefore those assets have been brought over at the historical basis, net
of depreciation. The analysis of the intangible values purchased were allocated to the Lockwood customer list (30% or $394,550)
and the developed software and licensing technology (70% or $920,600).

Capitalized Software Development Costs

The Company capitalizes software development
costs, under which certain software development costs incurred subsequent to the establishment of technological feasibility have
been capitalized and are being amortized over the estimated lives of the related products. Capitalization of computer software
costs is discontinued when the computer software product is available to be sold, leased, or otherwise marketed.

Amortization begins when the product is available for release and sold to customers. Software development costs will be amortized
based on the estimated economic life of the product, anticipated to be 10 years.

Impairment of Long-Lived Assets

Periodically, the Company assesses the recoverability
of the Company’s intangible assets, consisting of the Trimax acquired intellectual property, OptiCon Network Manager software
and its trademark, unidentified Hemptech intangibles and goodwill and record an impairment loss to the extent that the carrying
amounts of the assets exceed its fair value. Based upon management's most recent analysis, the Company believes that
no impairment of the Company’s tangible or intangible assets exist at March 31, 2015 and June 30, 2014.

Revenue Recognition

The Company is principally in the business
of providing solutions for a secure intelligent energy platform that incorporates our secure wireless technology. Contracts include
multiple revenue components, comprised of our software licensing, hardware platforms, installation, training and maintenance. In
accordance with ASC 605-25 Multiple-Element Arrangements, revenue from licensing the software will be recognized upon installation
and acceptance of the software by customers. When a software sales arrangement includes rights to customer support,
the portion of the license fee allocated to such support is recognized ratably over the term of the arrangement, normally one year. Revenue
from professional services arrangements will be recognized in the month in which services are rendered over the term of the arrangement
and collection is probable.

Revenue associated with software sales to distributors is recognized, net of discounts, when the Company has performed substantially
all its obligations under the arrangement. Until such time as substantially all obligations under the arrangement are
met, software sales are recognized as deferred revenue. Costs and expenses associated with deferred revenue are also
deferred. When a software sales arrangements include a commitment to provide training and/or other services or materials,
the Company estimates and records the expected costs of these training and/or other services and/or materials.

Stock Based Compensation

The Company issues restricted stock to consultants
for various services. Cost for these transactions are measured at the fair value of the consideration received or the fair
value of the equity instruments issued, whichever is more reliably measurable. The value of the common stock is measured
at the earlier of (i) the date at which a firm commitment for performance by the counterparty to earn the equity instruments is
reached or (ii) the date at which the counterparty's performance is complete. The Company recognized consulting expenses
and a corresponding increase to additional paid-in-capital related to stock issued for services. Stock compensation for the
periods presented were issued to consultants for past services provided, accordingly, all shares issued are fully vested, and there
is no unrecognized compensation associated with these transactions.

Shipping Costs

The Company includes shipping costs and freight-in
costs in cost of goods sold.

Advertising Costs

The costs of advertising are expensed as incurred.
Advertising expenses are included in the Company’s operating expenses. Advertising expense was $0 and $4,706 for the three
month periods ending March 31, 2015 and 2014, respectively

Income Taxes

The Company accounts for income taxes under
the liability method. Deferred tax assets and liabilities are recorded based on the differences between the tax bases of assets
and liabilities and their carrying amounts for financial reporting purpose, referred to as temporary differences. Deferred tax
assets and liabilities at the end of each period are determined using the currently enacted tax rates applied to taxable income
in the periods in which the deferred tax assets and liabilities are expected to be settled or realized.

Earnings (Loss) Per Share

Basic EPS is calculated by dividing the loss
available to common shareholders by the weighted average number of common shares outstanding during each period. Diluted
EPS is similarly calculated, except that the denominator includes common shares that may be issued subject to existing rights with
dilutive potential, except when their inclusion would be anti-dilutive.

Based on an estimated current value of the
Company’s stock being equal to or less than the exercise price of the warrants, none of the shares assumed issued upon conversion
of the warrants, nor any of the stock assumed issued under the Company's 2004 Non statutory

Stock Option Plan, are included in the computation
of fully diluted loss per share, since their inclusion would be anti-dilutive. Convertible preferred shares have been included
in the dilutive computation, as if they would have been converted at the end of the period.

March 31,

2015

2014

Earnings (Loss) per share:

Net Loss

$ (5,986,795)

$ (1,588,452)

Common shares

862,476,893

110,592,793

Earnings (loss) per share, basic

$ (0.007)

$ (0.02)

*Potentially issuable preferred shares, if converted to common,
were considered but not included in the calculation of diluted earnings per share for the period ended March 31, 2015 and 2014,
respectively, because their inclusion would be anti-dilutive.

Recently Issued Accounting Pronouncements

We have reviewed accounting pronouncements
and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The Company has considered
the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified
principles will have a material impact on the corporation’s reported financial position or operations in the near term. The
applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration. Those
standards have been addressed in the notes to the unaudited financial statement and in our Annual Report, filed on Form 10-K for
the period ended June 30, 2014.

3. Going Concern

As of March 31, 2015, the Company has a working
capital deficit and has incurred a loss from operations and recurring losses since its inception resulting in a significant accumulated
deficit. As of March 31, 2015, the Company had negative working capital of approximately $12.6 million and approximately $2,100
in cash with which to satisfy any future cash requirements. These conditions raise substantial doubt about the Company's ability
to continue as a going concern. The Company’s is attaining revenues and management expects profitability in the future; however
operations have not yet attained a profit or break-even. Accordingly, the Company depends upon capital to be derived from future
financing activities such as loans from its officers and directors, subsequent offerings of its common stock or debt financing
in order to operate and grow the business. There can be no assurance that the Company will be successful in raising such capital.
The key factors that are not within the Company's control and that may have a direct bearing on operating results include, but
are not limited to, acceptance of the Company’s business plan, the ability to raise capital in the future, to continue receiving
funding from its officers, directors and shareholders, the ability to expand its customer base, and the ability to hire key employees
to grow the business. There may be other risks and circumstances that management may be unable to predict.

4. Acquisition of Subsidiary

On February 27, 2015 the Company, signed a
Stock Purchase Agreement (the “Agreement”) with FutureWorld Corporation, a party related by common ownership, for all
of the issued and outstanding capital stock of Hemptech Corp, a Delaware corporation (“Hemptech”), pursuant to which
the Company agreed to purchase, and the Seller agreed to sell, all the equity interests in Hemptech for a total purchase price
of Sixty Million ($60,000,000), in notes and common and preferred stock.

The Company recorded assets and liabilities
acquired at book value due to the related party rules. Goodwill was determined to be percentage of a valuation report on Hemptech.
Any difference in the net asset values and the consideration given was recorded as a loss on acquisition and as goodwill.

The pro forma results disclosed in the tables
below are based on interim statements of the Company and Hemptech. Various assumptions were made and are not necessarily indicative
of the results of operations that would have occurred had the Company completed this acquisition on June 30, 2013.

The assets and liabilities acquired as of February 27, 2015
and the consideration given are as follows:

$

-

Patents and trade

275

Amounts due from related party

500

Goodwill

15,000,000

$

15,000,775

Consideration

Note payable

$

10,000,000

Preferred stock

33,000

Common stock at market

10,010,000

20,043,000

Loss on acquisition

$

(5,042,225

)

The pro forma income statements for the combined Companies as if
they were together for the three and nine months since June 30, 2013 are as follows:

Three months

Three months

Nine Months

Nine Months

March 31, 2015

March 31, 2014

March 31, 2015

March 31, 2014

Revenues

$

12,863

$

27,550

$

43,046

$

118,747

Net income

$

(5,687,679

)

$

(513,024

)

$

(5,933,962

)

$

(1,588,452

)

EPS

$

(0.01

)

$

(0. 00

)

$

(0.01

)

$

(0.00

)

5. Accounts Receivable

Accounts receivable
reflect the amounts that have billed at their anticipated collectible amount. The Company receives contract acceptances on submitted
quotes. Due to the advanced planning required, contract modifications occur, therefore, management invoices contracts upon signing,
however, may reserve against invoicing until final scope of project negotiations or good faith deposits are made.

6. Property and Equipment

Property and equipment consists of the following:

March 31,

June 30,

2015

2014

(unaudited)

(audited)

Office and computer equipment

$ 120,636

$ 120,636

Furniture and fixtures & improvements

56,875

54,703

Computer software

5,468

5,468

182,979

180,807

Accumulated depreciation

(164,698)

(139,469)

$ 18,281

$ 41,338

For the nine months ended March 31, 2015 and 2014, the total depreciation
expense charged to operations was $25,229, and $24,802 respectively.

7. Intangible Assets

Intangible assets consists of the following:

March 31, 2015

June 30, 2014

(unaudited)

(audited)

Opticon fiber optic management software

$ 189,862

$ 189,862

Trademarks

1,275

1,000

TriMax intellectual property

6,329,342

6,329,342

180,020

180,020

Lockwood customer list

394,550

394,550

Lockwood licensing technology

920,600

920,600

8,015,659

8,015,374

Accumulated amortization

(7,324,291)

(6,201,411)

$ 691,368

$ 1,813,963

Goodwill – Hemptech acquisition

$ 15,000,000

$ -

For the nine months ended March 31, 2015 and 2014, the total amortization
expense charged to operations totaled $1,122,870 and $1,221,658, respectively.

Opticon fiber optic management software

The Company purchased all rights, titles and
interest in the Opticon fiber optic management software on July 26, 2005, from FutureTech, LLC. in exchange for common stock. The
agreement became effective upon FutureTech purchasing the acquired assets from Corning Cable Systems, LLC in exchange for $100,000
in cash. The Company recorded the common stock at the transferor’s historical cost basis determined under generally accepted
accounting principles.

On July 26, 2005, the Company purchased the
OptiCon Network Manager software system which consisted of version R3 and R4. At the time of the purchase, the software
system was out of date and had to be updated and integrated with other current business software systems, before it could be distributed
to customers. The development of R3 software system was completed during the quarter ended December 31, 2006, and is
available for distribution to customers. In June 2010 a transfer of 50% of the R3 license was returned to FutureTech, LLC at a
carrying cost value of $22,250.

During the three and nine months ended March 31, 2015 and 2014, the Company did not allocate any direct labor costs, and indirect
costs and expenses to this effort. The capitalized software costs are amortized when the software is actually sold to
customers. Amortization is provided based on the number of software units sold relative to the number of expected to be sold during
the software’s economic life.

TriMax intellectual property

On June 29, 2010 the Company acquired the assets
of Trimax Wireless Systems, Inc., including licenses and trademarks. The purchase price was allocated first to the identifiable
assets received, allocating the remaining costs to the intellectual property. The valuation considered future cash flows of the
operating intangible assets acquired. The valuation of the intellectual property was limited to the acquisition price (valuation
of stock consideration and note payable), less the fair market value of identifiable assets. The shares issued in exchange for
the acquired property were valued at the fair market value of the equivalent common stock as of the date of closing. The acquisition
carrying value assigned to the intellectual property was $6,329,342 for the period of March 31, 2015.

TriMax software

Software development costs, in the amount of
$180,020, were acquired in the Trimax acquisition. The proprietary software was an identified asset of the acquisition and valued
at the historical carrying value, cost. The capitalized software is available for sale and is to be amortized over a 5 year period.

Lockwood Technology Corporation

On May, 2011 the Company completed the acquisition
of controlling interest in Lockwood Technology Corporation, leading RFID software and hardware solutions provider, from Daedalus
Capital, LLC. Infrax Systems acquired 70% interest in exchange for stock and certain considerations, including a $50,000 note receivable
(due in 180 days) from the sellers to Infrax and $112,000 in cash received by Infrax at closing. Additionally, warrants were issued
for the purpose of possible future investment capital, to be received by Infrax. Shares were issued at the fair market value at
the date of the transaction ($1,650,000). The agreement included warrants for the purchase of 660,000 (post reverse split) common
shares at an exercise price of $5.00 (split adjusted, for a term of 3 years. The warrants are callable by Infrax at certain fair
market values of the common stock. Warrants were valued at $477,900 using an option price model (assumptions used in calculation:
volatility 400%; risk free rate 1.02%; dividend rate 0%). The total purchase price, net of cash, notes receivable, and net assets
acquired was $1,956,158 and was allocated to intangible assets.

The Company recognized an immediate impairment
in the amount of $641,008 in consideration of its analysis of future discounted cash flows and industry multiples of the acquired
Company, resulting in a net intangible assets of $1,315,150. Infrax also plans to utilize their expertise in future smart grid
deployment projects. Management’s allocation of the purchase price was based on our assessment of the

fair market value of the assets acquired, in
accordance with Accounting Standard Codification, Topic 805. Fixed assets and other tangible assets were evaluated for market value.
There were no identifiable assets that had any significant appreciation or impairment; therefore those assets have been brought
over at the historical basis, net of depreciation. The analysis of the intangible values purchased were allocated to the Lockwood
customer list (30% or $394,550) and the developed software and licensing technology (70% or $920,600), for the period of March
31, 2015.

Hemptech Corp.

In February 2015, the Company acquired a 100%
ownership interest in all of the equity of Hemptech Corp from a related party, for $60,000,000 based on an independent appraisal
of the Company. Consideration was a convertible note payable for $10,000,000, 33,000,000 preferred shares and 715,000,000 common
shares. The goodwill and unidentified intangibles were recorded at 25% of the valuation report.

8. Notes payable

Notes payable consist of the following as of
March 31, 2015;

March 31, 2015

June 30, 2014

Note payable to Trimax Wireless in the original amount of $712,500. Interest only payments 6% due December 29, 2010. The note was settled in November 2014.

$

-

$

712,500

Convertible note to LG Capital Funding in the amount of $32,500. Interest at 8% and principle are due on August 28, 2015. Convertible at 55% of market. Balance is net of discounts of $11,857 and $0, respectively.

17,693

-

Convertible note to Iconic Holdings in the amount of $110,000. Interest at 10% and principle are due on September 10, 2015. Convertible at 55% of market. Balance is net of discounts of $20,034 and $0, respectively.

14,966

-

Convertible note to KBM Worldwide in the amount of $53,500. Interest at 8% and principle are due on August 17, 2015. Convertible at 40% of market. Balance is net of discounts of $15,202 and $0, respectively.

38,298

-

Convertible note to Typenex Investments in the amount of $52,000. Interest at 10% and principle are due on October 3, 2015. Convertible at 40% of market. Balance is net of discounts of $20,800 and $0 respectively.

31,200

-

Convertible note to KBM Worldwide in the amount of $43,000. Interest at 8% and principle are due on September 21, 2015. Convertible at 40% of market. Balance is net of discounts of $15,273 and $0, respectively.

27,727

-

6,000

6,000

Demand note to an unrelated party from the Lockwood acquisition. Non-interest bearing.

-

6,000

135,884

724,500

Less current portion

(135,884)

(724,500)

Long-term portion

-

-

9. Related Parties Disclosures

Employment Agreements

The following agreements are with Shareholders,
Directors and Members of the Board:

Sam Talari

Effective
August 1, 2009, the Company entered into a three-year employment agreement with Sam Talari, one of the Company’s directors.
The agreement was automatically renewed for an additional one-year period, and subsequently renewed by the Board for an additional
one-year period through July 31, 2014. The Agreement provides for (a) a base salary of $15,000 per month, (b) a signing bonus equal
to one month salary, (c) four weeks’ vacation within one year of the starting date, and (d) all group insurance plans and
other benefit plans and programs made available to the Company’s management employees.

John Verghese

On October 19, 2010,
as amended January 1, 2010, the Company entered into a three-year employment agreement with John Verghese as Director of Product
Development, one of the Company’s directors. The Agreement provides for (a) a base salary of $6,500 per month, (b) a signing
bonus of $10,000, (c) three weeks’ vacation within one year of the starting date, and (d) all group insurance plans and other
benefit plans and programs made available to the Company’s management employees. Additionally Mr. Verghese has the option
to purchase 360,000 shares of common stock at $.025 per share, ratably vesting at the employment anniversary date. Mr. Verghese
works part time since January 2014.

Terry Gardner

On April 2nd, 2012,
the Company entered into a three-year employment agreement with Terry Gardner as VP of Professional Services. The Agreement provides
for (a) a base salary of $10,000 per month, (b) a signing bonus of $30,000, (c) three weeks’ vacation within one year of
the starting date, and (d) all group insurance plans and other benefit plans and programs made available to the Company’s
management employees. Additionally Mr. Gardner has the option to purchase 300,000 shares of common stock at $.04 per share, ratably
vesting at the employment anniversary date. Mr. Gardner works part-time since January 2014.

Karin Rohret

On
January 2nd, 2010, the Company entered into an employment agreement with Karin
Rohret as part-time Controller. The Agreement provides for (a) a base salary of $1,101.67 per month, (b) a signing bonus of $20,000
by the way of Company’s common stock within 30 days of signing the agreement. Additionally Ms. Rohret will be eligible to
receive a grant of 600,000 shares of common stock at founder level with a par value of .001. Vesting of the grant shall be at the
rate of 200,000 shares on each anniversary from the signing of the agreement. The salary was adjusted to $1,950 on January 2012
as the position required additional hours.

Other employment agreements exist with employees

Line of Credit, Master Agreement

On September 1, 2005, Mr. Sam Talari, one of
the Company’s directors, agreed to make advances to the Company as an interim unsecured loan for operational capital up to
a maximum of $350,000, evidenced by a master promissory note, with interest at the rate of 5% per annum, based on amounts advanced
from time to time, payable annually. Mr. Talari has pledged additional funding for operating capital, up to $500,000, under the
same terms as the original Master Note. Mr. Talari, from time to time, has converted advances and accrued interest in exchange
for equity shares. Mr. Talari continued making advances to the Company on the loan, of which $746,060 and $823,691 remains outstanding
at March 31, 2015 and June 30, 2014, respectively. Mr. Talari has pledged additional funding for operating capital, up to $1 million,
under the same terms as the original Master Note.

10. Income Taxes

There is no current or deferred income tax
expense or benefit allocated to continuing operations for the period ended March 31, 2015 and 2014. The Company has not recognized
an income tax benefit for its operating losses generated through March 31, 2015 based on uncertainties concerning the Company’s
ability to generate taxable income in future periods. The tax benefit is offset by a valuation allowance established
against deferred tax assets arising from operating losses and other temporary differences, the realization of which could not be
considered more likely than not. In future periods, tax benefits and related deferred tax assets will be recognized
when management considers realization of such amounts to be more likely than not.

For income tax
purposes the Company has available a net operating loss carry-forward of approximately $ 20,979,482
from inception to March 31, 2015, which will expire, unless used to offset future federal taxable income beginning in 2024. The
tax years ending June 30, 2010 through June 30, 2014 are open for inspection by both Federal and State Agencies.

11. Equity

Preferred stock

The Company has 50,000,000 shares of preferred stock authorized
designated into several series at $0.001 par value.

The Company has issued convertible preferred shares. Shares are
convertible into the Company’s common stock, at the option of the holder, at the prescribed conversion rate. Conversions
are as follows:

Shares

Conversion

Outstanding

Rate to Common

Preferred Series A

2,400,000

375

Preferred Series A1

8,889

89

Preferred Series A2

88,889

20

Preferred Series A3

25,846

16

Preferred Series B1

12,330

300

Preferred Series B2

1,210

300

2,537,164

Common stock

The Company has 950,000,000 shares
of common stock authorized at $.001 par value.

Non-controlling Interest

The Company owns 70% of the Lockwood subsidiary. A non-controlling
interest amount in the amount of xx was recorded.

Change in control

With the purchase of Hemptech, the majority of the outstanding stock
is now owned by FutureWorld Corporation. These financial statements will be consolidated into those of Futureworld and certain
eliminations between entities will occur.

12. Commitments and Contingencies

Lease/Rental Agreements

Our executive office is now located in an office complex under annual five year lease, beginning
June 1, 2012 at a rent of $ 4,729 per

month. We entered
into this 5-year commercial lease agreement in St. Petersburg, Florida with Kalyvas Group II, LLC. Our lease provides us with approximately
4,100 square feet of: reception area, nine offices, a lab/production area, inventory room, server room, kitchenette and one conference
rooms. We believe the facilities are adequate for our operational needs. We may require additional offices in the event we obtain
funding and acquire additional customers.

Rent expense for the nine months ended March
31, 2015 and 2014 amounted to $22,378 and $33,837 respectively. Space is shared with Futureworld and it’s subsidiaries.
$ 20,183 was allocated to Futureworld.

Foreign Currency Translation

The balance sheets of the Company's foreign
subsidiaries are translated at period-end rates of exchange, and the statements of earnings are translated at the weighted-average
exchange rate for the period. Gains or losses resulting from translating foreign currency financial statements are included in
accumulated other comprehensive income (loss) in the consolidated statements of stockholders' equity and comprehensive income.
At March 31, 2015 and 2014 no foreign currency translation was conducted due to the immaterial nature of its subsidiary’s
balance sheet.

Legal Matters

From time to time the
Company may be a party to litigation matters involving claims against the Company. Management believes that there are no current
matters that would have a material effect on the Company’s consolidated financial position or results of operations as of
March 31, 2015.

During the quarter ended
June 30, 2011, Trimax Wireless filed a complaint relating to the unpaid balance of the Promissory Note executed with the acquisition
of Trimax Wireless. In November 2014, the Company negotiated a full and final settlement of this dispute, including all accrued
interest for a one-time cash payment of $30,000, and the issuance of 2,325,581 common shares valued at $40,000 at the time of issuance.

During quarter ended
June 30, 2012, The Company filed a Federal lawsuit against Lockwood Worldwide and its owners, current and previous management in
the UNITED STATES DISTRICT COURT, SOUTHERN DISTRICT OF FLORIDA. We are requesting an award of compensatory damages, an award of
treble damages pursuant to the provisions of RICO and other applicable federal and state statutes and an award of punitive damages
in the full amount by the jury against each of the Defendants. As Plaintiff, we have suffered damages as a result thereof, an amount
in excess of $4,350,000. We are asking for a total damages up to 4 times the amount of loss or close to $16M. As of the filing
of this 10/Q, we have had success in freezing their operational account and all funds associated with that account. We are
also in settlement talks with Sovereign bank.

13. Subsequent Events

In April 2015, the company issued 9,750,000
common shares for conversion of debt.

In May 2015, the Company issued 25,948,661
for conversion of debt.

Item 2.

Management’s Discussion and Analysis or Plan of Operation

Management’s Discussion and Analysis or Plan of Operation

The information contained in Item 2 contains
forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Actual results may materially differ from those projected in the forward-looking statements
as a result of certain risks and uncertainties set forth in this report. Although management believes that the assumptions made
and expectations reflected in the forward-looking statements are reasonable, there is no assurance that the underlying assumptions
will, in fact, prove to be correct or that actual results will not be different from expectations expressed in this report.

We desire to take advantage of the “safe
harbor” provisions of the Private Securities Litigation Reform Act of 1995. This filing contains a number of forward-looking
statements which reflect management’s current views and expectations with respect to our business, strategies, products,
future results and events, and financial performance. All statements made in this filing other than statements of historical fact,
including statements addressing operating performance, events, or developments which management expects or anticipates will or
may occur in the future, including statements related to distributor channels, volume growth, revenues, profitability, new products,
adequacy of funds from operations, statements expressing general optimism about future operating results, and non-historical information,
are forward looking statements. In particular, the words “believe,” “expect,” “intend,” “anticipate,”
“estimate,” “may,” variations of such words, and similar expressions identify forward-looking statements,
but are not the exclusive means of

identifying such statements, and their absence
does not mean that the statement is not forward-looking. These forward-looking statements are subject to certain risks and uncertainties,
including those discussed below. Our actual results, performance or achievements could differ materially from historical results
as well as those expressed in, anticipated, or implied by these forward-looking statements. We do not undertake any obligation
to revise these forward-looking statements to reflect any future events or circumstances.

Readers should not place undue reliance on
these forward-looking statements, which are based on management’s current expectations and projections about future events,
are not guarantees of future performance, are subject to risks, uncertainties and assumptions (including those described below),
and apply only as of the date of this filing. Our actual results, performance or achievements could differ materially from the
results expressed in, or implied by, these forward-looking statements. Factors which could cause or contribute to such differences
include, but are not limited to, the risks to be discussed in our Annual Report on form 10-K and in the press releases and other
communications to shareholders issued by us from time to time which attempt to advise interested parties of the risks and factors
which may affect our business. We undertake no obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events, or otherwise.

The following discussions should be read in
conjunction with our financial statements and the notes thereto presented in “Item 1 – Financial Statements”
and our audited financial statements and the related Management’s Discussion and Analysis of Financial Condition and Results
of Operations included in our report on Form 10-K for the fiscal year ended June 30, 2014. The information set forth in this “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” includes forward-looking statements that involve
risks and uncertainties. Many factors could cause actual results to differ materially from those contained in the forward-looking
statements.

Our Business

INFRAX is a pioneer designer, developer, systems
integrator and manufacturer of turnkey secure solutions for the utility industry. We are a provider of unique secure, cost-efficient
solutions that provide everything required to bring the utility’s technological platform into the 21st. century. Our SIEP™
platform provides: 1) Network Transport and Management (secure 2 way communications), 2) Secure Smart Devices (Smart Meters), and
3) Asset management, Grid Optimization and Security, all in an integrated state-of-the-art Smart Grid solution that truly provides
our customers with end to end grid management capability.

Based on our review of the Smart Grid related
products against which the Secure Intelligent Energy Platform now competes, we believe that none of them provide the required encryption
and threat detection capabilities required to secure the energy grid.

The Utility industry’s aggressive deployment
of Advanced Metering Infrastructure (AMI) and data management devices has led to the accelerated reliance on fiber optic communications
to many of the key substations. However, the existing utility networks cannot provide the security, reliability and connectivity
to extend the reach to the consumer locations.

Today’s evolution of Smart Grid design
and implementations actually began several years prior to the current initiatives. The same applies to the products designed by
most of the major players including Itron, Silver Spring and GridPoint. Although the current security initiatives and elected officials
have good intentions, they have missed the window of opportunity to truly integrate security from the beginning by several years.
Similar to the credit card industry, banking, health care, and most other industries that conduct business online, the next electrical
infrastructure will need to feature security as an add-on that is applied after the Smart Grid is implemented.

Recently discovered vulnerabilities in smart
meters have been identified that could allow an attacker to obtain complete control of the meters. Specifically, an attacker could
exploit these vulnerabilities to turn off electricity to hundreds of thousands of homes. Thus, an attacker could execute a wide-scale
Denial of Service (“DoS”) attack against homes and businesses.

The Advantage
of Our Technology

By entering the market without the burden of legacy products and technology, Infrax is able to focus
on future technologies and will be poised to provide advanced solutions for companies that are yet to deploy AMI and harden previously
installed networks and devices.

While the current use of RF technology is inherently
less reliable, Infrax is focused on using highly encrypted data over secure tunnels using a variety of communications medium including
WiFi, Cellular or other public communication media. Infrax's secure smart grid platform incorporates a communications transport
known as GridMesh™, and a device and data security management tool known as

GRiM. Secure management of the "last mile"
backhaul is necessary for utilities to implement Smart Grid applications such as AMI, and substation and distribution automation.

We believe that our Secure Intelligent Energy
Platform will give us a competitive advantage in the emerging and evolving Smart Grid environment. By utilizing our solution, Utilities
can secure their networks and prolong the lifecycle of previously deployed components by eliminating the security concerns that
would necessitate replacement.

Over the last several quarters, Infrax has
been developing the company’s flagship product - Secure Network Interface Card (SNIC) for electric meters. While the initial
focus will be to develop the card for one of the largest meter manufactures in the world, the final objective is to have a universal
card that can be used in any meter in the world. The wireless part of the first prototype has been completed and successfully tested.
With the development and improvements continuing, we will have a complete working prototype by the end of this summer. Although
details of the card cannot be disclosed for obvious reasons, our emphasis has been to address the security of the data to and from
a meter as well as to provide a robust communication platform that can be used not only for meter data but also in Distribution
Automation projects such as capacitor bank and volt/var controllers. The Company believes that the SNIC along with newly created
Professional Services division will hasten the deployment of all Smart Grid technology for resource constrained small and mid-sized
utilities.

(b)SPIDer – Secure Perimeter Intrusion Detection

Building on our expertise in network and physical
security platforms, the company has introduced the first active and secure intrusion detection network. The SPIDer Network initial
offering is directed to the electrical energy company concerns with copper and material theft and its related impact to safety
and homeland security. Infrax Systems is committed to change the present paradigm in the electric utility industry as to how physical
and data security processes are deployed to protect electrical substations, remote critical infrastructure facilities, communications
networks, advanced distributed controls and intelligent meter networks. Copper theft and its potential threat to safety and homeland
security has been estimated by the Department of Energy and other sources as approaching a Billion dollar cost annually in the
US alone. Attacks on critical infrastructure such as electric and water resources can cause wide scale economic devastation which
would greatly amplify these costs. Most of these assets have little to no security or intrusion detection and what little exists
is forensic in nature as it helps to identify what happens but does not detect the threat at the moment it occurs. Infrax Systems’
vision is based on a trusted network of intelligent devices which detect intrusion at any level and quickly determines friend or
foe thus taking action when necessary to secure critical infrastructure and intelligent property.

Infrax Systems has recently started a marketing
campaign for the SPIDer product line. Currently we have demonstrated the basic SPIDer system to three utilities and are scheduled
for another two demonstrations. Five additional utilities have expressed interest in the product. Most are for the image based
level although one has shown initial interest in the first level coaxial based system. One customer utility has requested a proposal
for a complete network linking 12 facilities. Initial projections indicate a strong market and revenue. Revenues are expected to
grow logarithmically as utilities finish their pilot stages and budget for next year.

(c)Professional Services

Infrax Systems has introduced a new division
which provides engineering and professional services to its energy customers. This division is charged with packaging Infrax Systems
products into engineered solutions that are marketed to their customers. Professional services provides engineering, construction
and project managements services to the smaller utilities such as local municipalities, Rural Electric Cooperatives and Investor
Owned Utilities who may not have the manpower or expertise to accomplish their goals. By leveraging our over 100 years of combined
experience in the electric utility and telecommunications industries, Infrax Systems is well placed in an industry which is becoming
the newest high tech phenomenon. The Smart Grid vision relies on vast networks of intelligent devices which sources in the Data
and Enterprise Network industry indicate will surpass by several orders of magnitude of any know data network of today. Even a
relatively small utility will have upwards of a million devices operating on thousands of individual domains. These networks not
only will control instant and real time power flow but will also be the cash register for the Utility industry. Security, scalability
and authenticity as well as day to day maintainability are the utmost concerns in providing an intelligent power grid that is safe
and secure. Infrax Systems will be a leader in designing, building and securing these networks and solutions.

Initial marketing campaigns have been targeting
the municipalities and Electrical Cooperatives. Currently we have responded to one major RFP for Capacitor Bank networks and Smart
Grid infrastructure worth in excess of 1.5 million dollars. We are also working on a pilot project for our AMI product with the
availability of the SNIC, with a major utility. If the pilot project is accepted and successful, we may be asked to provide AMI
to all their customers. The revenue from such project, for only one utility, will be overwhelmingly substantial. We are also in
the process of negotiations for a contract to provide customer engineer expertise for a fiber optic construction project and we
have installed several radios for one of our initial customers. We have started to communicate with few utilities in Florida to
become qualified bidders for the coming projects. We will continue this process with utilities all along the east coast of USA.

(d)Lockwood Technology

The past few months have been eventful for
Lockwood Technology. The new development team has made substantial progress in their efforts to map out the new features and improvements
to our core software platform “Asset Tracker”. The new features, operational improvements, and added functionality
has been released as an incremental upgrade as version v11.6.

Our development road map plan is to give the
entire platform a structural overhaul and graphical refresh by porting all of the features and functions into a “Browser-Based”
user GUI that can be more easily deployed, managed, and updated. This would allow Lockwood’s platform to be deployed in a
“Cloud-Based” architecture. This upgrade will better position Lockwood’s solutions to be sold into the targeted
vertical markets. This will also allow us to better manage different licensing options and increase revenues.

Lockwood has also created a new sales and marketing
strategy that will reduce the sales cycle timing and increase the profit margin on all deals. This plan is based on a channel strategy
that leverages the efforts of numerous established VAR’s and integrators that each has their own substantial pipeline of
deal within the targeted vertical markets. The plan also incorporates the creation of “Pre-Configured” versions of
the platform that are tailored to the specific vertical markets we target. We call these “Vertical Market Applications”.
These Vertical Market Applications make the systems easier to sell than those of a custom integration based solution. This approach
also reduces the man-hours involved in these implementations by pre-configuring the platform with industry specific best practice
routines. There is still a significant amount of flexibility within the application to maintain our competitive advantage of the
other “Fixed” platforms.

The initial vertical markets we have identified
based on our market research are:

• Healthcare

• Education

• Hospitality

• Retail

• Government

This new channel based strategy is beginning
to take shape. We have identified the 400-500 individual integrators to partner with, each with their own sales pipelines within
the vertical markets listed above. We are working with the RFID and Barcode hardware manufacturers to promote our software as the
catalyst that makes their hardware more valuable as part of a total solution. We have developed a web-based sales training system
that will enable these VAR’s to incorporate our software solutions with the RFID hardware products they sell to solve the
problems their customer are experiencing. This approach will no doubt make Lockwood’s value proposition obvious to the customers
while increasing our profit margins as well as those of our integrator partners.

On the short-term revenue front, we have had
success in maintaining our existing customer base. We are experiencing a 99% take rate on our annual software maintenance renewals.
This will provide a consistent and predictable stream of recurring revenue. We are also working with our existing customers to
learn more about how they operate and are providing them with the ongoing support to maintain this success. We are also identifying
the customers that are using older versions of the platform and encouraging them to upgrade to the current revision level. The
upgrade process is facilitated by our customer’s compliancy policies requiring them to meet certain network security standards
that can only be achieved by implementing the newer versions of our software.

We also have a significant sales pipeline of
proposals that include not only software sales, but also complete solutions that incorporate hardware, software and professional
services as well. This pipeline is made up of deals with our existing channel partners such as Lockheed Martin’s IS&GS
Group, the US Army, and numerous other municipal, state, and federal government projects and RFP’s. We are also working on
significant deals with our international partners within the same vertical markets in the Middle East and Europe.

INFRAX market opportunity exists in one of
the largest industries in the world. Globally, according to the International Energy Agency (IEA), this industry is expected to
spend close to $10 trillion dollars by 2030 to upgrade electrical infrastructure. Technology innovations in power delivery have
been fermenting for years, but only now is the confluence of physical need and social expectations creating an environment in which
real and sustained monetary commitments are being made to create a “Smart Grid” built on information-based devices,
digital communication and advanced analytics. Networking giant Cisco has estimated that the market for smart grid communications
will grow into a $20 billion-a-year opportunity as the infrastructure is built out over the next five years. Researchers at Specialists
in Business Information (SBI) forecast the market will grow to $17 billion-per-year by 2014 from today’s $6 billion. Globally,
SBI expects the market for smart grid technologies to grow to about $171 by 2014 up from approximately $70 billion in 2009.

Furthering our development towards becoming
a leader in the emerging smart-grid industry, on April 8, 2011 we acquired a 70% controlling interest in Lockwood Technology Corporation,
to supply RFID and asset tracking, among other technology value to our product lines.

Name Changes

None.

Changes in Management

On March 1st. 2015, Mr. Saeed Talari resigned from his
position as acting CEO. Mr. John Verghese was elected CEO effective March 1st., 2015.

Critical Accounting Policies

Our significant accounting policies are more
fully described in Note 2 to the financial statements. However, certain accounting policies are particularly important to the portrayal
of our financial position and results of operations and require the application of significant judgment by our management; as a
result they are subject to an inherent degree of uncertainty. In applying these policies, our management uses its judgment to determine
the appropriate assumptions to be used in the determination of certain estimates. Those estimates are based on knowledge of our
industry, historical operations, terms of existing contracts, our observance of trends in the industry and information available
from other outside sources, as appropriate.

Our critical accounting policies include:

·

Principals of Consolidation -The consolidated
financial statements include the accounts and operations of the Infrax Systems, Inc., and its wholly owned subsidiary Infrax Systems
SA (Pty) Ltd. (collectively referred to as the “Company”). Accordingly, the assets and liabilities, and
expenses of this company have been included in the accompanying consolidated financial statements, and intercompany transactions
have been eliminated.

·

Revenue Recognition -The
Company is principally in the business of providing solutions for a secure intelligent energy platform that incorporates our secure
wireless technology. Contracts include multiple revenue components, comprised of our software licensing, hardware platforms, installation,
training and maintenance. In accordance with ASC 605-25 Multiple-Element Arrangements, revenue from licensing the software
will be recognized upon installation and acceptance of the software by customers. When a software sales arrangement
includes rights to customer support, the portion of the license fee allocated to such support is recognized ratably over the term
of the arrangement, normally one year. Revenue from professional services arrangements will be recognized in the month
in which services are rendered over the term of the arrangement.

Revenue associated with software sales to distributors is recognized, net of discounts, when the Company has performed substantially
all its obligations under the arrangement. Until such time as substantially all obligations under the arrangement are
met, software sales are recognized as deferred revenue. Costs and expenses associated with deferred revenue are also
deferred. When a software sales arrangements include a commitment to provide training and/or other services or materials,
the Company estimates and records the expected costs of these training and/or other services and/or materials.

·

Long-Lived Assets - We depreciate property and equipment and amortize intangible assets, including software development costs over the respective assets’ estimated useful life and periodically review the remaining useful lives of our assets to ascertain that our estimate is still valid. If we determine a useful life has materially changed, we either change the useful life or write the asset down or if we determine the asset has exhausted its useful life, we write the asset off completely.

Capitalized Software Development Costs - We capitalize software development costs incurred subsequent to the establishment of technological feasibility and amortize them over the estimated lives of the related products. We discontinue capitalization of software when the software product is available to be sold, leased, or otherwise marketed. Amortization of software costs begins when the developed product is available for sale to our customers. We amortize our software development costs over the estimated economic life and estimated number of units of the product to be sold.

·

Stock Based Compensation -We recognize stock-based compensation expense net of an estimated forfeiture rate and therefore only recognize compensation cost for those shares expected to vest over the service period of the award. Calculating stock-based compensation expense requires the input of subjective assumptions, including the expected term of the option grant, stock price volatility, and the pre-vesting option forfeiture rate. We estimate the expected life of options granted based on historical exercise patterns. We estimate stock price volatility based on historical implied volatility in our stock. In addition, we are required to estimate the expected volatility rate and only recognize expense for those shares expected to vest. We estimate the forfeiture rate based on historical experience of our stock-based awards that are granted, exercised or cancelled.

Recent Accounting Pronouncement

We have reviewed accounting pronouncements
and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The Company has considered
the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified
principles will have a material impact on the corporation’s reported financial position or operations in the near term. The
applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration. Those
standards have been addressed in the notes to the unaudited financial statement and in our Annual Report, filed on Form 10-K for
the period ended June 30, 2014.

Off-Balance Sheet Arrangements:

We do not participate in transactions that generate relationships
with unconsolidated entities or financial partnerships, such as special purpose entities or variable interest entities, which have
been established for the purpose of facilitating off-balance sheet arrangements or other limited purposes.

Subsequent Events:

N/A

RESULTS OF OPERATIONS

For the Three Months ended March 31, 2015 and 2014:

During the three month period ended March 31,
2015, we had sales from the delivery of equipment and services in the amount of $12,863 compared to $27,550 for the comparable
three month period ended March 31, 2014. The Company has increased its marketing efforts with Lockwood and retired product lines
that were not profitable.

Our expenses exclusive of amortization, depreciation
and stock based compensation increased by $19,629 to $174,009 from $154,380 for the three month period ended March 31, 2015 and
2014, respectively. Expenses increased primarily to an increase in professional fees during the quarter.

Amortization and depreciation expense was $382,718
for the three months ended March 31, 2015 as compared to $415,623 for the three months ended March 31, 2014.

For the three months ended March 31, 2015,
we incurred a net loss of $5,776,226 compared to a net loss of $513,024 for the three months ended March 31, 2014. This large variance
is primarily a result of the loss recorded on the purchase of Hemptech Corp. in the amount of $5,042,225. This loss is unique to
the purchase transaction, and not representative of any recurring trend. Additionally, the Company had an increase in interest
expense of $145,153 to $156,622 for the three months ended March 31, 2015 as compared to $11,469 for the three months ended March
31, 2014.

For the Nine Months ended March 31, 2015 and 2014:

During the nine month period ended March 31,
2015, we had sales from the delivery of equipment and services in the amount of $43,046 compared to $118,747 for the comparable
nine month period ended March 31, 2014. The Company has increased its marketing efforts with Lockwood and retired product lines
that were not profitable.

Our expenses exclusive of amortization, depreciation
and stock based compensation increased by $42,527 to $494,688 from $452,162 for the nine month period ended March 31, 2015 and
2014, respectively. Expenses increased primarily to an increase in professional fees during the quarter.

Amortization and depreciation expense was $1,148,099
for the nine months ended March 31, 2015 as compared to $1,246,459 for the nine months ended March 31, 2014.

For the nine months ended March 31, 2015, we
incurred a net loss of $5,954,800 compared to a net loss of $1,588,452 for the nine months ended March 31, 2014. Again, this large
variance is primarily a result of the loss recorded on the purchase of Hemptech Corp. in the amount of $5,042,225. This loss is
unique to the purchase transaction, and not representative of any recurring trend. This loss was offset partially by a gain on
the settlement of a debt in November 2014 in the amount of $871,446. Additionally, the Company had an increase in interest expense
of $183,155 to $156,622 for the nine months ended March 31, 2015 as compared to $33,384 for the nine months ended March 31, 2014.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2015, we had approximately
$2,100 in cash with which to satisfy our cash requirements for the next twelve months, along with approximately $250,000 remaining
on the line of credit from Mr. Talari to pay normal operating expenses, while we attempt to secure other sources of financing.

Since the inception of our Master Note Agreement,
Mr. Talari has continued to advance funds to us as needed. Mr. Talari remains committed to continue funding the Company and has
regularly converted amounts outstanding and accrued interest, under the note agreement, to our common stock, in order to have money
available. At March 31, 2015, we owe Mr. Talari $746,060 on the master promissory note plus accrued interest.
Mr. Talari has pledged funding for operating capital, up to $1,000,000, under the same terms as the original Master Note.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

We are a Smaller Reporting Company as defined
by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

Item 4.

Controls and Procedures

Disclosure controls and procedures: As
of March 31, 2015, we carried out an evaluation of the effectiveness of our disclosure controls and procedures, with the participation
of our principal executive and principal financial officers. Disclosure controls and procedures are defined in Exchange Act
Rule 15d–15(e) as “controls and other procedures of an issuer that are designed to ensure that information required
to be disclosed by the issuer in the reports that it files or submits under the Act (15 U.S.C. 78a et seq.) is recorded,
processed, summarized and reported, within the time periods specified in the Commission's rules and forms and include, without
limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that
it files or submits under the Act is accumulated and communicated to the issuer's management, including its principal executive
and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required
disclosure.” Based on our evaluation, our President/Chief Executive Officer and Chief Financial Officer have concluded
that, as of March 31, 2015, such disclosure controls and procedures were not effective.

Changes in internal control over financial
reporting: Based upon an evaluation by our management of our internal control over financial reporting, with the participation
of our principal executive and principal financial officers, there were no changes made in our internal control over financial
reporting during the quarter ended March 31, 2015 that have materially affected or are reasonably likely to materially affect this
control.

Limitations on the Effectiveness of Internal
Control: Our management does not expect that our disclosure controls and procedures or our internal control over financial
reporting will necessarily prevent all fraud and material errors. An internal control system, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further,
the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations on all internal control systems, no evaluation of
controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These
inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because
of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion
of two or more people, and/or by management override of the control. The design of any system of internal control is also
based in part upon certain assumptions about risks and the likelihood of future events, and there is no assurance that any design
will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because
of ---changes in circumstances and the degree of compliance with the policies and procedures may deteriorate. Because
of the inherent limitations in a cost-effective internal control system, financial reporting misstatements due to error or fraud
may occur and not be detected on a timely basis.

PART II - OTHER INFORMATION

Item 1

Legal Proceedings.

We have filed a Federal
lawsuit against Lockwood Worldwide and its owners, current and previous management in the UNITED STATES DISTRICT COURT, SOUTHERN
DISTRICT OF FLORIDA. We are requesting an award of compensatory damages, an award of treble damages pursuant to the provisions
of RICO and other applicable federal and state statutes and an award of punitive damages in the full amount by the jury against
each of the Defendants. As Plaintiff, we have suffered damages as a result thereof, an amount in excess of $4,350,000.00. We are
asking for a total damages up to 4 times the amount of loss or close to $16M. As of the filing of this Q, We have had success in
freezing their operational account and all funds associated with that account.

Item 1A

Risk Factors.

There have been no material changes to the risk factors previously
disclosed in our Report on Form 10-K for the year ended June 30, 2014 filed on September 29, 2014 with the Securities and Exchange
Commission.